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The average rate on a 3-year-fixed rate personal loan has ticked up slightly to 11.61% for the week of October 4th, but that’s after having fallen to its lowest level of the year two weeks prior, according to data from Credible that looked at borrowers with a credit score of 720 and above who used their marketplace. And the average rate on a 5-year-fixed rate personal loan fell to 14.23% from 14.86% during that same week. That said, the rate you’ll personally get on a personal loan depends on factors such as credit score, length of the loan, the amount of the loan and the lender. And some rates start as low as 2.49%; see the lowest rates you can qualify for here, and below. Note that to get the lowest rates, you typically must have excellent credit, use the personal loan for specific things, and get a shorter loan term. And these loans aren’t right for everyone. Here’s what to know before you take one out.
How do these rates compare to previous weeks?
|||3-year, fixed-rate loan||5-year, fixed rate loan|
|Week of 8/2/21||11.53%||13.71%|
|Week of 8/9/21||11.31%||13.82%|
|Week of 8/16/21||11.34%||13.76%|
|Week of 8/23/21||11.44%||13.89%|
|Week of 8/30/21||11.72%||16.51%|
|Week of 9/6/21||11.97%||15.30%|
|Week of 9/20/21||10.70%||14.35%|
|Week of 9/27/21||11.25%||14.86%|
|Week of 10/4/21||11.61%||14.23%|
Source: Credible data that looked at borrowers with a credit score of 720 and above who used their marketplace
What is a personal loan?
Quite simply, it’s a loan in a fixed amount that you get from an online lender, bank, or credit union that you will typically pay back, usually each month, over anywhere from one to seven years. Loan amounts tend to range from roughly $1,000 up to $100,000.
Should you take out a personal loan?
If you have excellent credit and you need funds quickly, taking out a personal loan can mean a fast approval process and lower rates than with a credit card. If your credit isn’t great though, personal loan interest rates can be high.Be sure that you not only can repay the loan (not doing so can damage your credit score and your ability to get future loans at good rates), but that you also factor in fees like the origination fee. Annie Millerbernd, personal loans expert at NerdWallet, says origination fees can range from 1% to 10% of the loan amount based on your credit — or can be a one-time flat rate. Learn more about origination fees on personal loans here .
What should — and shouldn’t — you use a personal loan for?
“If you can qualify for a lower rate than the alternatives, a personal loan can be an attractive way to consolidate credit debt, medical debt, fund your business or improve your home,” says Ted Rossman, senior industry analyst at Bankrate. “Refinancing private student loans with a personal loan could make sense, but I couldn’t recommend it for federal student loans because they have more generous forbearance and forgiveness policies,” says Rossman.
Don’t use a personal loan for discretionary purchases like vacations or paying for a wedding, experts say, as interest charges can add up easily. “It’s easy to end up overspending and paying a lot of money in interest. It would be better to save up and pay from your savings if possible,” says Rossman.